Zoe started a taxi business on 1 January 2009. The following information relates to the vehicles...

 

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Zoe started a taxi business on 1 January 2009. The following information relates to the vehicles account in the non-current assets: 1 January 2009 1 April 2010 1 July 2010 1 July 2011 Purchased Vehicle A by cheque for £6 000 Purchased Vehicle B on credit from Soames Garages for £8 000 Purchased Vehicle C by cheque for £10 000 Purchased Vehicle D for £9 000 giving in part exchange Vehicle B at an agreed valuation of £5 400. The balance of the purchase price was paid by cheque. Zoe has the following depreciation policy: Vehicles are depreciated at the rate of 20% per annum using the straight line method Depreciation is charged on vehicles purchased or sold during a year in proportion to the months of ownership. (i) the accounting concept of going concern (2) (ii) why the accounting concept of going concern is important when charging depreciation in the financial statements. (2) (b) Prepare a table showing the depreciation charged on each of the vehicles A, B, C and D, in each of the years 2009, 2010 and 2011. (8) (c) Prepare the following for the year ended 31 December 2011: (1) Vehicle account (ii) Vehicle - Provision for depreciation account (iii) Vehicle disposal account. (10) (d) (i) Distinguish between capital expenditure and revenue expenditure. (2) (ii) State, giving your reasons, whether the following would be capital expenditure or revenue expenditure: • Vehicle tax for Vehicle A • A new engine for Vehicle A. 8 (4) (e) Evaluate Zoe's choice of the straight line method as a basis for charging depreciation on vehicles. Zoe started a taxi business on 1 January 2009. The following information relates to the vehicles account in the non-current assets: 1 January 2009 1 April 2010 1 July 2010 1 July 2011 Purchased Vehicle A by cheque for £6 000 Purchased Vehicle B on credit from Soames Garages for £8 000 Purchased Vehicle C by cheque for £10 000 Purchased Vehicle D for £9 000 giving in part exchange Vehicle B at an agreed valuation of £5 400. The balance of the purchase price was paid by cheque. Zoe has the following depreciation policy: Vehicles are depreciated at the rate of 20% per annum using the straight line method Depreciation is charged on vehicles purchased or sold during a year in proportion to the months of ownership. (i) the accounting concept of going concern (2) (ii) why the accounting concept of going concern is important when charging depreciation in the financial statements. (2) (b) Prepare a table showing the depreciation charged on each of the vehicles A, B, C and D, in each of the years 2009, 2010 and 2011. (8) (c) Prepare the following for the year ended 31 December 2011: (1) Vehicle account (ii) Vehicle - Provision for depreciation account (iii) Vehicle disposal account. (10) (d) (i) Distinguish between capital expenditure and revenue expenditure. (2) (ii) State, giving your reasons, whether the following would be capital expenditure or revenue expenditure: • Vehicle tax for Vehicle A • A new engine for Vehicle A. 8 (4) (e) Evaluate Zoe's choice of the straight line method as a basis for charging depreciation on vehicles.

Answer rating: 100% (QA)

ai The accounting concept of going concern refers to the assumption that a business will continue its operations for the foreseeable future It assumes that the business will not be liquidated or face ... View the full answer